AUDIO: Moneyfacts discuss falling savings rates

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Rachel Springall, finance expert at Moneyfacts.co.uk, chats to BBC Radio Norfolk's Matthew Gudgeon about the latest hot topics in the world of personal finance.

As well as covering how the downgrading of the UK economy's AAA rating could affect the value of the pound against the euro, Rachel looks at how falling savings rates are leaving some investors at a loss as to where they should place their hard-earned cash.

Matt Gudgin: Tea time money? Let's say good evening to Rachel Springall from the Moneyfacts Group in Norwich. Hi Rach!

Rachel Springall: Thank you.

MG:Lovely to see you again. And as it's a Monday, it's personal finance. So what are we talking about this week?

RS: Well, a couple of things really. Firstly, savings. If you're lucky enough to have £100 and you're going to spare with it, you might be thinking of investing it. What you might need to know is the fact that you can only get about 2% of a return on your interest at the moment in most savings accounts. So you're probably more likely to look at easy access, so you can move around more easily. And others may be looking at fixed rates, but these are actually quite low at the moment, so it's probably best to have a look at the variable rates on the market.

MG: Be promiscuous.

RS: Yes.

MG:Play the field.

RS: Exactly. Just for savings rates, yeah I mean, the top three easy access accounts today, if you were to look at investing £100, come from Chelsea Building Society, 2% with their Triple Access Saver, you can get it by branch or post. Coventry BS have an online saver paying 2% as well and as I suggest, it's online. It has a 0.4% bonus for 12 months, so you need to consider that. And for new and existing account holders of a Nationwide current account you can get 2% as well online. So, again, they're all kind of 2%, but they're the market leaders at the moment for easy access accounts, which is interesting to see.

MG: And that's the best at the moment 2%...

RS: Yeah, it's the best.

MG: Which doesn't sound a lot, does it? I mean... And this really is being sort of kept down, isn't it, by the funding for mortgages?

RS: Yes. The Funding for Lending Scheme has sort of decimated the savings market since August. We have seen falls across all areas. So all variable and fixed rates are at historic lows. So really, what you want to do at the moment is move your money around as quickly as possible, which is why easy access accounts are quite a good option. If you're looking at fixed, the best you can get is 2.5% and that's locking your money away for five years, so it's not ideal for people really.

MG: This is normally an exciting period, isn't it, looking at all the different offers. That if you have got some money to save, ISAs come into play...

RS: Yes.

MG: But they're less attractive this year, although I suppose you never turn your nose up to a tax-free saving.

RS: Yeah, I mean, ISAs are brilliant at the moment if you're looking at them because the tax year is coming to an end in April. So, you obviously do need to bear that in mind. But again, you probably want to look at easy access ISAs and move the money around and also, there's quite a few best buys that actually don't accept transfers in. So what that means is, any previous tax allowances which are on a low rate, you can't move over to the new nice rate. So again, you need to look at that if you're looking at moving your money also, which isn't brilliant.

MG: What about the rating, the AAA rating, that we've lost in this country, and of course, the chancellor getting a lot of stick for it. Have we noticed any real difference then in the various markets today or indeed the personal finance markets that we look at, I mean has there been any great movement because of what's happened?

RS: What's happened, yeah. I mean, the AAA rating was lost from Moody's. They've actually downgraded to an AA1. What that actually means in real terms is, it's gone from the highest quality to the lowest credit risk... To the high quality and the low credit risk. So it's kind of a slight change. But obviously what's happened is, because it's something that's not happened since the 1970s, it's quite a big difference. Now Mr Osborne's actually said this afternoon that he blames the slowing global economy for it. He's also stated to keep interest rates low, which is obviously interest rates for mortgages. So, he's saying that low rates will continue for mortgages and the borrowing will still keep going. Obviously at the moment, nothing's going to really happen with the savings market unless something happens to kind of get that moving because providers don't need to obviously borrow the money from the actual savers, they are taking it at the moment from government through the Funding for Lending Scheme. But with the downgrade, what they've repeated this afternoon is: "Don't spend more than what you have coming in", which is easier said than done in some cases.

MG:Yeah, not so easy sometimes when you're having to juggle things.

RS: Precisely, precisely.

MG: And also maybe people going on a holiday into Europe this year may want to buy their Euros early.

RS: Exactly, yes.

MG: It is certainly not advice, but it is certainly worth thinking about, because there's a thought that the Pound may be on parity with the Euro at some stage this summer.

RS: Yeah, we have seen falls, and the weaker Pound means imports are more expensive for one and also holidays in countries where you'd say the Euro or the Dollar are more expensive. The pound is at a two and-a-half year low against the Dollar at the moment, which isn't brilliant. And at the moment Germany and Canada are the only major economies that actually have a AAA rating because the effects of the financial crisis of 2008 are still affecting the global economies. So, people need to put that into perspective that we've only just been downgraded since that happened in 2008 and thus expect that if things change, if they kind of put a plan together to see a commitment to dealing with that, we may actually see the AAA rating come back. So, yeah, keep positive.

MG: What about China? I suppose they don't really borrow, they just lend it out, don't they?

RS: Yeah, they are a different...

MG:Yeah, completely different, don't they? .

RS: Definitely different to the UK and you've got to think as well, the UK obviously has the benefit schemes. So, we have the NHS. So, we have a lot of things that obviously the government drill money into and, obviously, we also help offshore causes too. So we do put a lot of money out of this country to lots of different things.

MG: Well, there we go. We'll keep an eye on it, Rachel, thank you very much for coming in.

RS: Thank you very much.

MG: We'll see you on a future Monday...

RS: Yes.

MG: Sometimes.

RS: On a future Monday.

RS: Thank you.

MG: Rachel Springall from Moneyfacts Group in Norwich.

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